Energy Companies Stocks Plummet as DeepSeek Shows AI Doesn't Need Entire Coal Plants to Cheat on Homework

China-based AI startup DeepSeek has been absolutely liquidating the AI tech bubble since trading opened Monday.

Basically, the company's powerful new AI model, known as R1, seems to demonstrate that filling schools with Anne Frank chatbots doesn't need to be the massive energy sink that AI industry has long insisted.

That's rattled tech stocks in AI-adjacent industries, with the semiconductor company Broadcom down over 17.5 percent over two days, and Nvidia continuing to fluctuate after shedding nearly $600 billion in one day, dragging the NASDAQ down by an astonishing 3 percent.

Now joining them are energy and utility corporations, as investors reel from DeepSeek's more efficient model seeming to use considerably less power than OpenAI to achieve similar results. Essentially, fossil fuel outfits had been banking on huge new datacenters needing tons of energy.

"Natural-gas producers EQT and Antero Resources each declined more than 9 percent. Pipeline giants Kinder Morgan and Williams Cos. ended 9.3 percent and 8.4 percent lower, respectively," the Wall Street Journal reported. "Nuclear-plant owner Constellation Energy and Vistra, which runs one of America’s largest fleets of gas-fueled power plants as well as solar farms, were some of the top performing stocks in the S&P 500 last year. On Monday, they dropped 21 percent and 28 percent, respectively."

The timing of DeepSeek's reveal was astonishingly unfortunate, coming to prominence right after Donald Trump announced a $500 billion government-led AI venture, with the newly-minted president musing that the awesome potential of AI might require power plants hooked up directly to datacenters.

Even worse timing — which is saying something, under the circumstances — might have been Chevron announcing a huge new partnership to build natural gas plants in the United States with the express purpose of running energy-hungry new datacenters after DeepSeek's reveal and subsequent AI stock implosion.

In a more rational world, DeepSeek's efficiency — which was achieved through an open-source development model — would be a universal cause for celebration.

Unfortunately for our new tech oligarchy, the announcement flies directly in the face of the tech sector's preferred narrative of AI scaling: the idea that simply adding more computing power will lead to better and better AI, even if the environmental impact is grim.

Investors have taken this financially convenient hypothesis as gospel for years, leading to inflated market valuations for startups, energy conglomerates, and big tech companies eager to spill untold lakes of oil, coal and uranium to stay ahead of China.

"Thus far OpenAI and its peer scaling labs have sought to convince the public and policymakers that scaling is the best way to reach so-called [artificial general intelligence]," AI reporter Karen Hao wrote on X-formerly-Twitter. "This has always been more of an argument based in business than in science."

As such, tech critics are enjoying a bit of schadenfreude, given that the entire American model for AI development hinged on the tech's ability to replace nearly all knowledge workers in the US, accounting about 12 percent of the US labor force. Now that DeepSeek claims to do OpenAI's job more efficiently than it can, the American for-profit tech corporation is getting a taste of its own medicine.

"OpenAI has been burning through staggering sums of cash to keep up its scaling paradigm and has yet to figure out how to balance its checkbooks," Hao continued, "and it turns out it didn't need to spend so much cash."

More on AI stock bubble: Trump Embraced AI and It Exploded Spectacularly in His Face